FCA in High Court claim over ‘illegal’ investment schemes

The Financial Conduct Authority has launched a High Court action against alternative investment firm Capital Alternatives and 13 other firms and individuals over allegations they are involved in the running over “illegal” and unauthorised collective investment schemes.

The FCA said it has asked the High Court to find that Capital Alternatives Limited, African Land, Reforestation Projects and at least 13 other firms and individuals were “promoting and/or operating collective investment schemes in the UK illegally and without its authorisation”.

African Land, also known as Agri Capital, offers investments in rice farm harvests in Sierra Leone, and is operated by African Land Limited.

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Reforestation Projects, also known as Capital Carbon Credits, offers investments in carbon credits generated from land in Sierra Leone, Brazil and Australia. It is operated by Reforestation Projects Limited.

The FCA flagged up that while it does not regulate the sale of land, property or carbon credits, it does regulate CISs and that a firm must be authorised by the FCA to operate a collective scheme in the UK.

The FCA said it also believes the defendants made “misleading statements or gave false information” when promoting the schemes to investors.

The High Court has ordered a preliminary trial to decide whether the schemes are CISs. The FCA said the date of this trial has not been confirmed but that it should take place in the autumn of 2013.

While it waits for the hearing to take place, the regulator stated it has obtained undertakings and court orders that freeze the “major assets” of most of the defendants and prevent them from promoting the schemes.

In a statement, the FCA said: “If the court decides the schemes have been run or promoted illegally as CISs, it can order the defendants to pay us compensation that will then be paid to investors in the schemes.

“The value of the assets held by the defendants is not clear at this stage, so we are not sure how much could be returned to investors.

“However, you should be aware that, even if the court grants an order for investors to be compensated, we have found in similar cases that the defendants usually do not have enough assets or funds to pay the full amount ordered.”